House of COMMONS








WEDNEsday 11 JULY 2007




Evidence heard in Public Questions 1 - 59





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Oral Evidence

Taken before the European Scrutiny Committee

on Wednesday 11 July 2007

Members present

Michael Connarty, in the Chair

Mr David S Borrow

Mr William Cash

Mr James Clappison

Jim Dobbin

Mr David Heathcoat-Amory

Kelvin Hopkins

Mr Lindsay Hoyle

Mr Bob Laxton

Richard Younger-Ross




Witness: Mr Pat McFadden, MP, Minister of State for Employment Relations and Postal Affairs, and Ms Jane Whewell, Director, European Strategy and Labour Market Flexibility, Department for Business, Enterprise and Regulatory Reform gave evidence.

Q1 Chairman: Welcome, Minister, Mr McFadden. It is very nice to see you here. As you know, we have noted in the Green Paper Modernising Labour Law the mention of temporary workers and agency workers, and that reminded us that we had in the past followed the beginnings of what we thought was a trail to put into place the Directive on temporary and agency workers, but it had seemed to have got lost somewhere in the process, so we decided to take some evidence from your predecessor, with his active encouragement, and it has now fallen to you in your new role. Can you introduce your staff member, and we will then commence questions?

Mr McFadden: I will let Jane introduce herself.

Ms Whewell: My name is Jane Whewell, and I am a Director in the Employment Relations Directorate of BERR (Business, Enterprise and Regulatory Reform) and I am responsible for negotiations in Europe on the Agency and Working Time Directives. I am also responsible for UK enforcement of domestic law on agency workers and policy lead on working time domestic legislation.

Q2 Chairman: We would like to know a little more about the process. It seemed to have been a fundamental part of the Lisbon agenda when it was first declared so why it has taken so long to reach the point it is at, and do we need to have some knowledge about which countries have been party to this? Can I ask a very simple question to you? In February the Government expected negotiations on the Agency Workers Directive to resume later in 2007. Do you expect the Portuguese Presidency to revive the negotiations?

Mr McFadden: Yes, we do. Our understanding is that they have indicated that they will, and that there will be a meeting at official level, probably in September of this year, to explore different Member States' positions on this issue. They have tentatively put it on what I think is called - and this is not a term from me, but the term that is used - the "Fantasy Agenda" for the Employment Council in December. By that, they mean if they can reach agreement and a successful conclusion. The short answer to your question is that our understanding is that the Portuguese presidency wants to make progress on this.

Chairman: That is very good news.

Q3 Richard Younger-Ross: Minister, what do you see as the main provisions of the draft Directive?

Mr McFadden: The main provision of the draft Directive is to ensure equal treatment in terms of pay and those other things that go along with pay between agency workers and permanent employees. There are a number of other issues around that, which you may want to come on to, in relation to which Member States take different positions, before you get to that; but the main purpose of the Directive is to have a regime of equal treatment under certain conditions around the pay and what you might call pay and perks.

Q4 Mr Borrow: Which of the provisions are the most contentious, and where does the UK Government fit into those?

Mr McFadden: There are probably three main areas of the Directive that might be contentious or subject to discussion among Member States. The first would be around the relationship between the Directive and the issue of equal treatment and collective agreements, because from the UK's point of view, if we reach agreement on an equal treatment for an agency workers' directive, we would want it to properly apply to agency workers across Europe. There are some Member States that have, on the face of it, regimes of equal treatment for agency workers, but in practice there are internal collective agreements, which mean that things are not always what they seem. Sometimes agency workers, because of collective agreements, may be paid less than other workers, or it may be to do with qualifying periods. It may sometimes be a regime of not equal treatment, which is indefinite. That is one of the issues around collective agreements and how they would apply. The second area is liberalisation because if we have a regime where agency work is accepted as a legitimate part of the economy - and we believe that it is -there should be equal access for reputable agencies to labour markets and to work in other Member States, and that is an important provision in the Directive. I gather that some other Member States have issues with this liberalisation and equal access. The third issue relates to whether there should be a qualifying period and, if so, how long. Different Member States take different views on that. If we can reach agreement on those three areas, I would be very optimistic.

Q5 Chairman: A qualifying period means the number of days, weeks or months that a worker has to work before these conditions would become compulsory.

Mr McFadden: Correct.

Q6 Mr Hoyle: On the draft Directive, has the Government consulted with employee organisations, trades unions, or employers directly?

Mr McFadden: Yes, we have a constant process of dialogue with both business organisations and with trades unions on this issue, some of which have quite strong feelings either way, but that is an important part of our preparation and the process towards negotiations, to consult with both of them, yes.

Q7 Mr Hoyle: Are you getting two extremes of the argument?

Mr McFadden: No, I would not say that. There are some people who take a stronger view on this and on some of the issues I have said than others, so I would not say it was a matter of extremes. It is important for us, where we favour this and want to reach agreement on it, to be talking to both unions and the business organisations about their position.

Q8 Mr Hoyle: What is the Government side, with the unions or the employers? Previously it has always been with the employers. Is this new Government going to change?

Mr McFadden: I would not say the Government has always sided with employers on these kinds of issues. Our position is that we want to reach agreement on this Directive; that has been our position for some time. Because of the three issues I have outlined, this is complex in Europe, but, as I said at the beginning, it is now back on the agenda under the Portuguese presidency, and I would hope that we could reach agreement on it.

Q9 Mr Hoyle: What pressure is Lord Digby-Jones putting on it?

Mr McFadden: I have not discussed it with him so far.

Mr Hoyle: That is worrying!

Mr Cash: I was going to ask the same question about Lord Jones, not Lord Digby-Jones, I am told.

Mr Hoyle: Of Birmingham.

Q10 Mr Cash: Of Birmingham, no less!

Mr McFadden: It is the same answer, whatever he calls himself.

Mr Cash: I may say he was not too enthusiastic about this Committee when he came here.

Chairman: It is not that he was not happy about this Committee; he was not happy about the rest of parliamentary scrutiny of European business, he said.

Q11 Mr Cash: He was not very keen on - well, let us not go there.

Mr McFadden: I can step outside while you sort this out!

Chairman: You will find that this often happens, Mr McFadden; there are often people who think they are chairing the Committee!

Q12 Jim Dobbin: I think you have answered this question in part, but can you expand on the Government's view of this Directive?

Mr McFadden: It wants to reach agreement on the Directive. We support it in principle and we have said that for some time now. We believe there is a strong argument for a regime of equal treatment, but we do want these three issues I mentioned to be resolved. Those are the liberalisation, the impact on workers covered by collective agreements in other Member States, and the qualifying period. If we can resolve those, I would be hopeful of progress. Our position, in short, is that we support the principle of a Directive on agency workers, but that is not a blank cheque. We want to reach the right agreement and get the right Directive.

Q13 Mr Clappison: When was this Directive first proposed?

Mr McFadden: I think back to 2001 when there was discussion between the social partners, who did not reach agreement. The path of directives sometimes, as you will know better than me, is that they sometimes come out of discussion with business organisations, between European business organisations and EUTC. They did not reach agreement on this, and then the Commission picked up the baton and proposed a draft Directive back in 2002, so it has been around for five or six years.

Q14 Mr Clappison: I was just looking at the way this has proceeded. Whether you approach this from the employers' point of view or the trade unions' point of view, it has been dragging on for a long time. It must be a distraction. It is not a very good advertisement for the European decision-making process, is it?

Mr McFadden: You could take that view, or you could say this is a difficult issue. We have different labour market regimes in different Member States, and to have an all-encompassing agreement you have to deal with those complexities. I am not here to criticise the European decision-making process. Members here will want to do that. From the point of view of the Government, if it is back on the agenda, as we believe it is under the Portuguese presidency, we want to make progress on it.

Q15 Mr Clappison: You have referred to organisations discussing this at a Europe-wide level, and then the Commission jumping on the bandwagon, to put it that way. Have you had any ordinary members of the public coming forward to say they want a measure like this; people who want to work as an agency worker in another European country?

Mr McFadden: To quote the Prime Minister, "I have only been doing this for a short time"! Perhaps I could ask Jane, who has been dealing with this for longer, what the representations over a longer period have come in on.

Ms Whewell: We have certainly had representations from companies, and on a couple of occasions they brought workers with them, saying they were very keen to offer agency services overseas in Europe and to open up the markets, which in many ways are closed. We have certainly had representations from people seeking to liberalise the markets and find more jobs and more work for British companies and British workers overseas. That aspect of the Directive we have certainly had representations on. I do not remember having representations from individual workers seeking equal treatment, but certainly the trade unions have many examples of people who have said they would like equal treatment.

Mr McFadden: It would be fair also to record the fact that when there was a Private Member's Bill on the floor of the House, there were a very, very large number of supportive petitions and submissions from organised workforces about the effect it was having on the British workforce. That was on the floor of the house during a debate, and a predecessor accepted there was quite a bit of tension building in the workforce. This is not quite the issue, but there is a wider agenda around what one might call vulnerable workers, which is not purely to do with the Directive, but it is a quite live agenda which the Department is quite focused on. I appreciate that is not the same issue as the Agency Workers Directive, but it is just to record it is there and that we are quite focused on it.

Q16 Richard Younger-Ross: Why is this a European issue and not an issue for individual countries to sort out within their own boundaries?

Mr McFadden: Partly because there has been a Directive in play for five or six years. Although that has been a long time, we are still hopeful that we can reach agreement in Europe on it. It would certainly not be the first time we had reached agreement in Europe on issues connected with the labour market.

Q17 Richard Younger-Ross: The fact that there is a directive does not make it a European issue. Why was there a directive in the first place? What was the basis for saying there was a need for this under whatever provision?

Mr McFadden: My understanding is that this was in a sense - I think the phrase might have been used "a family of directives" or a group of directives. There were three. Some may have been to do with part-time work, fixed-term contracts - do not quote me on that but there were other issues before they came to this Directive; and at the time when this was beginning we thought it was, if you like, an issue of completing that work. The issue of whether you do it domestically or whether you do it in Europe is relevant. We would not want to legislate twice in the same area on this, so while it is in play in Europe and there is a prospect of agreement, then -----

Q18 Richard Younger-Ross: How does current regulation in the UK compare with that of other Member States?

Mr McFadden: The labour markets are quite different. There are some issues around vulnerable workers, but I would argue that we have had good employment conditions for the vast majority of workers. We have introduced things like the minimum wage. We have strong health and safety provisions. Sometimes, when there are breaches, and very public breaches that quite rightly arouse a lot of public concern, these are actually breaches of the existing laws. One of the reasons I raised the issue of vulnerable workers is that we are very focused on enforcement of the laws that exist.

Q19 Mr Heathcoat-Amory: The Commission has a target for reducing the burdens created by EU legislation by 25 per cent by 2012. Have you any idea what additional administrative and cost burdens this Directive might impose on British businesses, or indeed European businesses?

Mr McFadden: Formerly, before I did this job, I was handling the debtor regulation agenda at the Cabinet Office and the UK Government was very active in trying to put on the agenda the issue of admin burdens for European business. We have a domestic target for cutting that by 25 per cent. All Departments published simplification plans just before last Christmas, setting out progress towards that, so we are glad that the European Union has adopted such a target. Whether there has been an assessment on this particular Directive I am not sure.

Ms Whewell: There is one technical issue we wish to clarify when discussions resume in September. One of the issues with the current Directive is that it presupposes the existence of a comparable worker. In some countries in Europe, where agency work has actually been illegal until as recently as 2003, it is a very young market - and it is much more normal now for an agency worker to provide cover for somebody on maternity leave or somebody who is sick; and then there is an obvious comparator. One question we want to ask for assistance on in Europe is that in our market when we have a much more sophisticated and long-standing agency market, it is relatively normal for someone to go into an agency job where there is no comparator - maybe a company is trying a new line or a company is bringing in an expert because they do not have that expertise. So there is a real issue that could be a problem in administrative terms of how you define a comparable worker if there is not one. That is one of the issues we want to explore.

Q20 Mr Heathcoat-Amory: I think I detect from your answers that there is no estimate, no quantification of the potential burdens on business.

Ms Whewell: Because so much time has now passed since this Directive was first mooted, we are in the process as we speak of doing more research to get a better set of baseline data that will allow us to do a new assessment of the Directive. The figures are now so out of date - although there are figures we need better ones and we would hope to have some shortly.

Q21 Mr Heathcoat-Amory: After six years, we still do not know what the potential burdens are; and meanwhile the Commission has given us a target, self-imposed, to reduce the burdens by 25 per cent. How do we believe anyone any more when they have presumably in this Directive some estimate of additional burdens, but nobody knows quite what they are, and a target which we are supposed to believe that actually they are going to go in the opposite direction. Does this not make a nonsense of the whole process?

Mr McFadden: I do not think it does. What we did in this country to reach this target of 25 per cent was first to measure proper admin burden on business, which had not been done before, in a major survey of business. I think there is a process by which you can reach such a target. First, as you say, we have to make an assessment of what the admin burden is in the first place. The second issue is that we are talking here about an admin burden and sometimes people get confused or they elide the admin burden and the policy issue. They are not always the same thing.

Q22 Mr Heathcoat-Amory: Is this not another example of why everybody has lost all faith in the European Union as a regulator and administrative body, when they come up with ludicrous claims to be cutting burdens and here they are adding to them, but nobody can tell us by how much? Even the British Government, which takes some pride in - indeed I think your Department is now called the Department for Regulatory Reform - even you cannot tell us.

Mr McFadden: With the greatest respect, I would not, as you might expect, accept that everybody has lost faith in the European Union to do everything. I do think that it is legitimate for us, as a Member State, to encourage the European Union and to argue strongly that they take the admin burdens on business seriously. This is part of the European competitiveness agenda and it is something we do, and we will certainly keep on doing.

Q23 Kelvin Hopkins: Do other Member States share the UK Government's view on this?

Mr McFadden: On the Directive?

Q24 Kelvin Hopkins: Yes.

Mr McFadden: Some do and some do not. I think it would be fair to say there is a variety of views on this. The other thing you have got to remember is that because this has been in play for some time, the European Union has expanded in this period. We have had the new Member States. To be fair to them, it is now several years since this was really seriously pursued at the European Union level. I think we have yet to properly and fully explore their positions on this. There are some indications, but I think it will only be through the pursuit of this in the Portuguese presidency that we will get a full picture of where people are post the European Union expansion. Some of these discussions, because they did start back in 2001 and 2002, were before enlargement.

Q25 Kelvin Hopkins: Is not the reality that there is a real impasse because Britain is trying to drive through a liberalisation agenda - weakening worker security and making a freer market in labour, a flexible labour market; and that other countries that will want to make sure that Britain measures up to their standards of worker protection actually reduces the liberalisation of the labour market?

Mr McFadden: I do not accept that. I do not accept that we are the only country with concerns over some of the aspects of the Directive as drafted, nor do I accept a caricature that Britain is somehow a worse place to work than some of the countries that are also Member States. As I said, sometimes we find that there is a difference between equal treatment and very generous provisions on the face of it but when you explore it you find they are not quite like that in practice because of collective agreements to depart from those; so I am afraid I do not really accept the premise of your question.

Q26 Chairman: You have mentioned several times the question of collective agreements overriding. You appear to be saying that there are collective agreements that undermine the principle.

Mr McFadden: Yes.

Q27 Chairman: Can you be quite clear that if the UK had to sign such a directive, it would not be possible in the UK to undermine those basic directives; or is it possible that somebody could sign an agreement that would undermine the Directive and end up with people not having - what my understanding is that the basics would be the right to sickness pay and the right to holiday pay and the right to pensions, which temporary workers and agency workers tell us at the moment they are being denied because there are no laws in the UK that can make people pay those things if you come as an agency worker?

Mr McFadden: You raise two points there. The first is the extent to which we would implement the Directive. If we say something we would take it seriously and implement it in full. That has been the UK's record on these directives and I am sure that would continue in the future. We would not be looking for collective agreements to undermine that which we had signed up to at European level. It is important to be clear about what the Directive covers too. It does not cover everything that sometimes people expect it to cover. It tends to cover pay and some of the things that go along with pay for temporary workers. It does not, for example, cover issues like maternity leave or some other employment rights.

Q28 Chairman: It has certainly been part of my understanding that agency workers are at the moment denied rights. What rights would they get under this Directive? You say there would be no guarantee they would have rights to maternity leave; would they have rights to holiday pay or rights to -----

Mr McFadden: They would get a statutory maternity pay and certainly a right to maternity leave. It is essentially pay and other things that go with pay that are enjoyed by permanent comparable workers in the company; it is not the full suite of employment legislation, so it is things like overtime, work rates, rest periods and so on, that permanent employees in the same position will enjoy.

Q29 Kelvin Hopkins: There was an example in Sweden a year or two back where a construction company imported workers from the Baltic States and wanted to pay them much lower wages than the Swedish workers, and there was immediate mayhem and it was stopped; the legislation would not allow it to happen. What you are suggesting, or the British Government seems to be suggesting is that that sort of thing should be allowed and we should go for a much freer market in labour, which would undermine existing wages and conditions throughout Europe, particularly in the developing part of Europe.

Mr McFadden: I am not going to take issue and debate about wages and conditions. Some of the issues raised around, for example, migrant labour - we have seen some very public examples on the news of migrant workers in the UK being exploited, having illegal deductions from minimum wage, ending up working a huge period with very little money at the end of it. That is wrong under current UK law, and we do not seek in any way, shape or form to advance an agenda that would allow that kind of thing to continue either in this country or in other countries.

Q30 Kelvin Hopkins: The Greek Government recently used its supporters and ministers to talk out a private member's bill; and it had mass support amongst the trade unionists and many Labour MPs. The argument was, "We were waiting for the European legislation". If there were good faith, would the Government not then say, "We are prepared to have legislation, which is as far as we are prepared to go, subject to further improvement by the European legislation"; but not just to stop it, full-stop, and then wait for European legislation, which might take years to come and might actually never happen because there would be so much disagreement?

Mr McFadden: Well, our remit is to try to reach agreement at European level.

Q31 Kelvin Hopkins: But on our terms, not on their terms.

Mr McFadden: We do not seek to legislate twice in the same area if we can avoid doing so. As I said at the beginning of the session, the Portuguese presidency has put this back in play and I hope we can make progress on it on the basis that I have set out. If we do so, I think that would be a good conclusion. The other thing to say about all of this is that agency work is not all some kind of sweatshop work; some people want to do agency work. Some people like the flexibility of it. Not all agencies are somehow disreputable employers seeking to exploit their workers. There is a live and very important issue around vulnerable workers, but they are not all agency workers, and not all agency workers are vulnerable. There may be an overlap in some cases, but there is another perhaps somewhat overlapping agenda here of vulnerable workers. Jane, in her unit in the Agency Standards Inspectorate - the staff who enforce the national minimum wage employed by HMRC - the Gangmasters Licensing Authority and others are all focused on dealing with abuses that are abuses now under UK law. My predecessors, Jim Fitzpatrick and Alistair Darling, to their credit established a vulnerable workers enforcement forum. That has representation from employers, from trade unions, from the enforcement bodies and from the agencies. The Secretary of State and I are going to continue with that forum to explore exactly what abuses there are, how we can better co-ordinate the enforcement that currently exists and how we make sure that the laws that we passed are not undermined.

Kelvin Hopkins: I tried some years ago to push through a very modest Private Member's Bill to try and improve employment law and bring it in line with current law with what is commonly found on the continent of Europe in certain areas. I was told by one of your predecessor ministers that the Government did not want a vote on Second Reading, and even though there was hardly anybody there - it was low down on the list and it was not going to be taken seriously anyway - but I was told they did not want a vote on Second Reading. I said: "Why?" They said: "Because the CBI would not like it." Is the Government still basically backing the CBI rather than the trade unions?

Q32 Mr Hoyle: Back to Lord Jones!

Mr McFadden: I think it is wrong - and I hope I do not venture into political territory here.

Q33 Chairman: I think we are straying quite a way away from the agenda item. I know Mr Hopkins feels very - I do not know that you need to answer the question. It is not necessary.

Mr McFadden: I will just make this point. I think it would be a mistake for us continually to think in terms of the choice between backing what the trade unions want or what the CBI wants. Both trade unions and good employers want a healthy and flexible, thriving economy. That is something we want too. I do not see this as a choice between these two in terms of these types of decision.

Q34 Mr Laxton: Reference has been made earlier to the amount of time this has been kicking around in Europe. Is it not the case, Minister, that the Government to date has been quite happy to see this kicking around in Europe for five, six or seven years, and probably would be quite happy - there may be changes, one hopes - but they would be quite happy to see it remaining in Europe? Although you have made the comment that in terms of the draft agreement the Government is supportive of the basic underlying principles, the devil is always in the detail. The accusation has been made to me that the UK is one of the governments that is in the front line of putting all sorts of stumbling blocks in the process. On the one hand, you can say, "Yes, we are supportive of the underlying principles", but when it comes down to the detail, agreement will never be reached. I hope that that is not the case, but perhaps you would like to comment on that?

Mr McFadden: I think it would be wrong to accuse the UK Government of trying to block this for the sake of blocking it. We do want to reach agreement on it, but not when we have no views on any of the provisions, or where we reach an agreement which applies in the UK fully but does not apply in other Member States fully. We want to reach the right agreement. As far as the UK Government's attitude to this has been - for example again when the previous Secretary of State was in post, he urged Jane and officials in her unit to go to Brussels and try to get this back up and running again, I think last year.

Ms Whewell: Last December, and again in February or it may have been March this year.

Q35 Mr Laxton: Are the pressures here - and I am not talking about the pressures from CBI or the unions - that much greater in the UK than other countries? We have a far larger number of agency companies; we have huge numbers of people engaged, being employed as agency workers - far, far more than the rest of Europe altogether perhaps. It is certainly more than any other country. We have a long-established culture of agency working within the UK, which is not the case in other countries; so there is greater pressure on us, I would suggest.

Mr McFadden: It is interesting. There is a perception that perhaps there is a golden world of employment rights in other Member States which does not exist in the UK. It is correct to say that agency work is an important part of the UK economy. As I said, it is not correct to describe it as being that all cases or many cases are exploitative in the UK economy. There are some Member States where you have a big percentage of the workforce continually on temporary contracts. They might not be agency workers, but they do not enjoy full employment rights because they are in one temporary contract after another, albeit directly with the employer and not through an agency. For example, in Spain that is about a third of the workforce. The labour markets around the different Member States are quite different. You are right to say that agency work is an important part of the UK economy - that is true; but it is not a simple contrast between in the UK you have agency workers forming an important part and everybody else has these full, permanent guaranteed rights elsewhere across the EU. The situation is far more subtle.

Q36 Mr Borrow: I can understand the Government not wanting to legislate twice, so I can accept that that may be an argument; but it is clear that the House has got very strong views that legislation in this area is to take place. What I think we would expect to see from Ministers is some commitment to ensure that the EU reaches agreement. The key question is, if through the Portuguese presidency progress is not made, will Ministers be bringing forward UK legislation to ensure that this issue is dealt with at the UK level if it cannot be done at EU level?

Mr McFadden: I think we should pursue an agreement at the European level if we can. That is our position. I hope you do not mind, Mr Chairman, if I do not get drawn today on what our response might be were that not to happen because it is back on the agenda and we are hopeful that it might happen. That is what we want to pursue. I would not want to go further than that today.

Chairman: I think you have said twice, Minister, that you do not want to say what the fall-back position is should you fail to succeed.

Q37 Richard Younger-Ross: I should have said this at the beginning: my previous profession, before becoming a Member of Parliament, was in architecture, and a lot of the work I had was as an agency worker. I found that very profitable and a very useful way of working. Indeed, as a Member of Parliament, as I am sure other Members of Parliament, I have staff problems occasionally over the summer. We may also employ agency workers, and a number of us have cleaning staff in London and we may also employ agency staff to help clean our offices or our flats. I am personally quite used to both sides of the divide, both as an employed and an employer of agency workers. What I am concerned about with the legislation is not whether or not there is a need for legislation - certainly in terms of vulnerable workers - but that the road to hell is paved with good intentions, and that we are falling somewhere between Mr Heathcoat-Amory's criticism of that being just added bureaucracy, and Kelvin Hopkins's concern that it is just a CBI plot - but that in trying to answer both of those we are not getting the real answers. What impact has the Department made on salaries for agency workers? Will this legislation be inclined to drive the salary down in that it gives other rights to those?

Ms Whewell: It is going to be quite a complicated picture. Partly it depends on the nature of the Directive we end up with, because there are several fundamental parts of it still under discussion. One potential concern of several that has been raised with this is that if we get the wrong Directive it could have the effect of driving a lot of people out of agency work because it could reduce use of agency workers; so we have got to get the balance right between offering proper protections to agency workers but not putting their jobs at risk either.

Q38 Richard Younger-Ross: The nub of this is that it could be good or it could have fears and it could be bad in that there would be less emergency workers as a result.

Ms Whewell: It would depend if there were a successful Directive because the liberalisation side offers greater opportunities for new jobs and new opportunities for British companies overseas. The right Directive also offers opportunities to workers and agencies as well, but this is part of why we have negotiation, to get it right.

Chairman: Can we move on? We have had a good explanation of the logic of bad legislation and good legislation.

Richard Younger-Ross: I am just wondering, Mr Connarty, -----

Chairman: It is becoming hypothetical.

Q39 Richard Younger-Ross: ----- whether if it is going to have - whether the Minister will say they will veto this if it has impact on flexibility of workers.

Mr McFadden: We want to get the right agreement. Where I would agree with you is, you said agency work could be valuable both for the employee and for the economy as a whole. That is a view we take. I have mentioned some examples of supply teachers and others who find this a convenient way of working for themselves. Sometimes it can be convenient to schools. There is a role here for short-term labour in particular circumstances and that is a welcome flexibility in the economy, and it is not something we want to lose.

Q40 Richard Younger-Ross: Will this bring into its remit people who are on temporary contracts, such as those on temporary contracts for Job Centre Plus, whose terms and conditions can be fairly appalling?

Mr McFadden: What we are talking about is agency workers where they are employees of an agency but they then work as - there is a third party here who is a hirer, and that is what we are talking about. Temporary workers are a slightly different issue because you can be a temporary worker. You talked about the Spanish example whereby you are temporary but you are directly employed by the hirer.

Q41 Richard Younger-Ross: There is no hope for staff at Job Centre Plus?

Mr McFadden: Whether it would be covered by this Directive or not depends whether or not they were supplied to Job Centre Plus or any other employer by an employment agency.

Q42 Mr Cash: It seems to me that underlying your philosophy, coming from all the questions that have been asked of you - you are really saying that in terms of better law-making - and we are going to be considering the communication on which you have made a report already shortly - that it is better for it to be done at a European level; but, as a matter of fact, you also had to concede there were circumstances in which it might not be the case. Against that background, why do you make the assumption that Europe is going to be better at producing the results when the consequence of agreeing it at that level, with the majority voting that goes with it, is irrespective of whether or not you have got present objections to parts of the proposals, you would end up with having it imposed on you and our constituents would have it imposed upon them, through the agency of the European Communities Act as a matter of British law? It does seem rather perverse - do you not agree?

Mr McFadden: I think you could probably - and perhaps have made that point about European Union directives in general. We are members of the European Union. It is part of the functioning of this system that we agree certain things at a European level. If we agree with them, they are not imposed.

Q43 Mr Cash: No, that is not true.

Mr McFadden: We are trying to reach agreement and there are gains in this from the UK outside our own borders. As I said a couple of times, part of the Directive is about liberalisation and about opportunities for UK companies employing agency workers to operate overseas in a way that they are quite often restricted from doing at the moment.

Q44 Mr Clappison: What we were often told about Europe is that we should work together in Europe in areas where we can best work together, and where there are gains for working in Europe. Are you convinced that there are gains from working together in Europe or is this something where we are better suited doing what we want ourselves?

Mr McFadden: In this area? I think there are gains: liberalisation is a potentially important gain. We have relatively liberal economy here, and a flexible economy, which is good for the UK and has resulted in higher employment. If we can have liberalisation built into this Directive, which is one of the aims, then I think that is a gain for us.

Q45 Mr Clappison: You conceded a while ago that there were costs to British businesses, but you have not quite worked out what they were yet.

Mr McFadden: We were asked about the admin work, and overall we will always have an eye on that. We will always try and implement anything that we do in as flexible and in the least burdensome way as we can with regard to administration.

Q46 Mr Clappison: Is there an admin burden or not, then?

Mr McFadden: Well, there may be.

Q47 Mr Clappison: There may be! Let me ask you about that because earlier on in your reply to my colleague you said you were always trying to persuade the European Union to take the question of administration costs seriously. How can you go along to the European Union under the Portuguese presidency when this is negotiated and ask them to take it seriously when you do not know the admin burden to this country?

Mr McFadden: This is not the only thing agreed by the European Union. The targets reducing admin burdens are across the board.

Q48 Mr Clappison: I appreciate that, but as far as this is concerned.

Mr McFadden: The admin burden is not, neither in this country nor at a European Union level, decided on a purely on a law-by-law basis. If it was you might find you decided never to pass another law again.

Q49 Mr Clappison: Are you going to have an admin burden by the time you negotiate this?

Mr McFadden: We will explore that as best we can.

Ms Whewell: We are in the process of getting up-to-date information at the moment. The last research we did ourselves was in 1999, and I am not at all sure it would help the House particularly to use data that is now eight years old to produce an assessment. We are in the process right now of getting the data that will provide us with an up-to-date assessment. The industry has moved incredibly quickly and is growing very fast, and we need to start on the basis of sensible data or we will just mislead everybody. As I mentioned before, we are going to raise one of the areas that could be an issue, which is how you define a comparable worker, because if that is left unclear it could indeed cause problems. That is one of the things we are planning to raise.

Q50 Chairman: There are some of us who remember at the beginning and were in this Committee began and it was supposed to be a liberalised market with protection for workers who might be exploited. It may cost some money to prevent that but it would be a much better outcome if people did not feel that they were being exploited. British workers were complaining particularly that because agency workers were used from other countries, they had had to join the same agency and ended up feeling exploited also; so the benefits were not felt.

Mr McFadden: I agree with that, Mr Chairman. I think it is important to consider the admin burden across the board in the European Union.

Q51 Chairman: It is my understanding that the British Government's contribution to the process of stalling was that they had set a very high target for the number of months people had to be in employment before any Directive would cover them; and it was then 12 months, which seems to be a very, very, very long time. I remember when I was a teachers' representative and a teacher that they used to take people on for 11-month contracts so that they did not have to give them permanency, and then take them on again for another 11 months. It was seen as exploitative and it was banned, but it still exists in the logic that the Government seems to be putting. Is the British Government prepared to reduce that timetable, and to reduce it as one of the elements in the negotiations, or does the British Government have a fixed position to take to these negotiations in the Portuguese presidency?

Mr McFadden: The qualifying period is an important issue. That is intended to tease out when someone effectively stops being an agency worker and filling in on a temporary basis in the way we are discussing; they become pretty much the same as a permanent member of staff. That is why it is important to get the qualifying period right. I suppose you want me to define in absolute terms what our bottom line would be.

Q52 Chairman: I just want to know whether the Government is going to be more flexible than they were around four years ago, when it seemed to stall this process.

Mr McFadden: I would prefer that we left the qualifying period to the negotiations, but there is an issue for the UK and for some other Member States. I would not want the Committee to -----

Q53 Chairman: Those ministers are not accountable to this Parliament, nor do they come before this Committee.

Mr McFadden: We are accountable and the other Member States are not - no, that is true.

Q54 Chairman: I hope you feel you are.

Mr McFadden: Of course I am.

Q55 Mr Cash: Even though he comes from Scotland, Chairman?

Mr McFadden: We will try and negotiate a qualifying period that we feel is in the interests both of the agency workers that we are talking about and the wider UK economy; and the qualifying period is of course an issue.

Q56 Mr Heathcoat-Amory: I would like to ask about the Working Time Directive. We have a position on this of course, but the Commission keeps returning to it to try and erode that under its unemployment harmonisation drive. I wonder where they have got to on that and how you see the future evolving, whether we can retain our position or whether you think it is in danger.

Mr McFadden: It is the position of the UK Government to retain the position of the Working Time Directive that we have adopted so far.

Q57 Mr Heathcoat-Amory: That was not quite my question! Can you tell us whether you think it is secure? We know that "no" is never taken as final in the EU; they return to things again and again until they get their way. Can you tell us if this is likely to be raised again, and how secure our position is on this?

Mr McFadden: The Chairman reminded me not to try and speak for other Member States. Perhaps I should head his warning! I think we are not the only ones to take the view we have taken on the Working Time Directive, and that has not changed in the past. I see no reason why it should. I can assure you that from the UK Government's point of view, we will continue to adopt the position we have.

Q58 Mr Heathcoat-Amory: Can I ask about the cost/benefit analysis? I was very surprised at your answer to my colleague Mr Clappison, where you appeared to be completely indifferent as to whether one was needed on the Agency Directive; it is actually a requirement on the Commission that they produce these things, let alone your Department, which has "Regulatory Reform" in its title now. I know your answer was partly corrected by Ms Whewell but do you have a slightly firmer position on the Working Time Directive whether any change should be preceded by a study as to its impact on the British economy on employment and employer costs?

Mr McFadden: We believe it is valuable to the British economy to have it. That is one of the reasons why we want to keep it.

Q59 Mr Cash: With regard to the impact of the Working Time Directive, not only of course within the United Kingdom but with respect to what we have already referred to in terms of liberalisation of the economies, by which in shorthand we mean globalisation: against that background do you not think that the fact that the degree of damage/loss that is being anticipated in gross domestic product from a current figure of about 21 per cent to 15 per cent for the European Union as compared with even the United States, which has been running at around 26 per cent in the light of China and India - in the context of something like the Working Time Directive, is that a reason in itself for making certain that we do have a cost-benefit analysis internationally of the effect of this where you are looking at it from the point of view of the United Kingdom or for that matter Europe as a whole, because it is bound, on the face of it, to lead to a lack of competitiveness?

Mr McFadden: That is not an unusual concept and not a million miles away from the view that the UK Government has taken. We do believe that flexibility is important and that giving people that choice is important. I think you are right to suggest that in a more open, flatter and globalised world, that is the case. That is why we have taken the position we have taken until now.

Mr Cash: It may surprise you, Mr McFadden, to know, because you come from quite near my constituency, that in our part of the world we believe strongly in the idea of free trade and have done for at least two centuries, so I am delighted to hear that at least we have that in common.

Chairman: I think this Government is led by a Prime Minister who appears to be not only closer in his home to Adam Smith but also to some of his thinking; but we all believe in free trade as long as it is constrained by laws that do not allow exploitation of labour. Thank you for coming along, Mr McFadden; it has been very good to have you here and it has been very enlightening. I wish you well in the negotiations. We hope you bring back the prize. Thank you, Ms Whewell.